The Securities and Exchange Board of India (SEBI) on Tuesday imposed a five-year ban on Dewan Housing Finance Ltd (DHFL)’s former CMD Kapil Wadhawan, former director Dheeraj Wadhawan, and four others from the securities market, citing a massive fraudulent scheme involving fund diversion and falsified financial records. The other barred individuals include Rakesh Wadhawan (former non-executive chairman), Sarang Wadhawan (former non-executive director), Harshil Mehta (former joint MD and CEO), and Santosh Sharma (former CFO). SEBI also levied fines totaling Rs 120 crore on the six.

According to SEBI’s 181-page order, Kapil and Dheeraj Wadhawan face five-year bans and Rs 27 crore fines each, Rakesh and Sarang Wadhawan received four-year bans and Rs 20.75 crore penalties each, while Mehta and Sharma face three-year bans with fines of Rs 11.75 crore and Rs 12.75 crore, respectively. During these periods, they are prohibited from accessing securities markets, dealing in securities, or holding key roles in listed companies or public firms raising funds.

SEBI’s investigation revealed that since 2006, DHFL’s leadership orchestrated an “egregiously fraudulent scheme” to divert Rs 14,040.50 crore to 66 “Bandra Book Entities” (BBEs) linked to the promoters, who lacked assets or business to justify such loans. These unsecured loans, misrepresented as retail housing loans, bypassed due diligence and were funneled through a fictitious “Bandra branch” using three accounting software systems. Over 30% of DHFL’s loans from 2007-08 to 2015-16 went to BBEs, with Rs 5,662.44 crore disbursed to 39 entities, 40% of which was redirected to 48 other promoter-linked firms.

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The fraud involved booking fictitious interest income to inflate profits, misleading investors and distorting DHFL’s share price. SEBI identified Kapil and Dheeraj Wadhawan as the primary orchestrators, with Rakesh and Sarang Wadhawan complicit through their board roles. The regulator’s action aims to protect investors and uphold market integrity, signaling a crackdown on financial misconduct in India’s corporate sector.

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